LATEST THINKING

FOLLOWING THE MONEY IN DIGITAL DISRUPTION

US healthcare start-ups will attract accelerated funding

Overview

The US healthcare system is under various pressures to “fix” inefficiencies while at the same time addressing changing consumer expectations. These forces are fueling the funding of digital healthcare start-ups and a new era of industry innovation as reflected by the emergence of new technology offerings and business models.

Traditional healthcare organizations and all industry stakeholders alike are taking interest in this shifting marketplace and trying to assess whether this funding momentum will continue, to what extent and to what market segments.

Five key drivers are sparking business opportunities and digital health start-up funding: healthcare system waste, the blending of physical objects with digital technology, industry newcomers, new investment models and social motivation. To varying degrees, these drivers will continue to fuel the acceleration of digital health funding, ultimately disrupting the industry.

A digital disruption in healthcare is already unfolding, with the marketplace seeing the emergence of new business models and technologies that are beginning to change social interactions, alter consumer expectations and ultimately improve health outcomes.

Billions of dollars are being poured into healthcare companies that combine Social, Mobile, Analytics, Cloud and Sensor (SMACS) technologies, with leading companies aiming to link both products, such as “wearables,” and services, such as clinical advice lines.

Key Findings

Opportunities to “fix” the US healthcare system will continue to accelerate start-up funding and the digital disruption. Accenture research estimates that digital health funding will double in the next three years, growing to $6.5 billion by 2017. The momentum will be sustained as digital health start-ups (and their funding entities) pursue a variety of ways to combine SMACS capabilities into a seamless experience that results in both medical cost savings and improved health outcomes.

In the paper, Accenture research identifies four distinct market segments that have received start-up funding between 2008 and 2013.1

Through 2017, Accenture predicts that stand-out organizations, and their applications, will succeed through the linkage of capabilities across these four segments. Emerging technologies will include clinical applications that meet regulatory approval and solutions with more advanced analytics capabilities, such as quantum computing, for example.

Recommendations

Patient engagement and experience in healthcare will be different in the not-too-distant future. All stakeholders—payers, providers, IT vendors, life sciences, pharma and industry newcomers—will need new strategies to respond to inevitable digital disruption and its potential to dis-intermediate target patients, health consumers and members.

Traditional healthcare organisations must develop ways to be relevant to the new health consumer, by encouraging and embracing, rather than resisting, digital healthcare start-ups. Strategies may include establishing external R&D arms (e.g., ventures and accelerators), acquiring start-ups for talent (e.g., “acqui-hiring”) or implementing novel investment models.

Healthcare leaders will also need to modify business objectives, while establishing structures to efficiently and effectively identify, test and prove clinical applications.

Finally, all stakeholders will face increased pressure to cultivate a diverse ecosystem of partnerships and alliances.